Service tax on penalty charged to contractor?

If penalty amount is included in bill amount in the value of taxable service, service tax is leviable on such amount.
Also as per the definition of value of taxable service, The "value of taxable service" means, the gross amount received by the service provider for the taxable service provided or to be provided by him. Penalty amount recieved is in relation to service  provided hence it should be included.

Originally posted by : CA Vishal Sormare
	We are going to charge Penalty to one of our contractor. He has completed the work but not as per terms and condition. Whether Penalty charged to Contractor is liable to Service Tax or Not?

yes ,According to my view penalty is also covered under the purview of ST because it relates to service.